Final answer:
The bowed out shape of the production possibilities frontier (PPF) is due to the law of increasing opportunity cost, which arises because resources are better suited for some purposes than others. As the production of one good increases, the opportunity cost of producing additional units rises, curving the PPF outward.
Step-by-step explanation:
The production possibilities frontier (PPF) typically has a bowed out or curvilinear shape due to increasing opportunity cost. This concept, known as the law of increasing opportunity cost, reflects the reality that resources are not perfectly adaptable to producing different goods. As production of one good increases, the resources are increasingly less suited to producing more of that good, which results in higher opportunity costs for additional units of output. This is why the PPF curves outward, representing a situation where transferring resources from education to healthcare, for example, results in a declining growth of one sector and increasing setbacks in the other.
The PPF demonstrates two types of efficiency: productive efficiency and allocative efficiency. It does not, however, determine society's choices on its own but illustrates the trade-offs and opportunity costs associated with different combinations of goods and services that a society can choose to produce.